Abstract
The increase in global water insecurity is one of the first perceivable effects of climate change. Two billion people are now without access to safe drinking water, and four billion experience water stress at least once a year, primarily in low per-capita emission countries. This nexus between climate change and water insecurity has significant implications for the global economy, with the water sector contributing 10% of global emissions. Though traditionally a local issue, climate finance mechanisms like the voluntary carbon market (VCM) present opportunities for a global, sustainable, performance-based funding stream to address water insecurity. Since 2010, water-related carbon projects have yielded over 45 million emission reduction credits. Our analysis estimates a global potential of over 1.6 billion tCO2e per year across various water project subsectors. At a $10 per credit average, this could attract over $160 billion in investments over the next decade, enhancing global water security. However, barriers like high intervention costs and limited technologies hinder widespread implementation, creating a tension between standardized and bespoke credits. We present case studies, spanning drinking water initiatives to the wastewater treatment sector that illustrate VCM's role in channeling private sector capital for water security in climate-vulnerable regions.